Print to PDF

International Compensation

03/24/2015

Many great bakers are average cooks. Many great cooks avoid baking all but the simplest of things. Baking requires precision in measurement and actions. Even a small mistake can result in an inedible mess. Cooking requires creativity and flexibility. The best outcomes are usually a result of unique twists that match the food to the audience. Compensation requires you to be both a baker and a cook.

A client recently had a member of their board ask that a new analysis be done for a new executive in exactly the same way as performed for a prior executive a couple of years ago. The company is unique in industry, location and compensation philosophy. Its peers have continued to grow, change and even disappear over time. It is simply not possible to replicate the exact recipes and processes used to create the numbers from years ago (or even more than a few months ago.)

Executive pay is often more like cooking than baking. You are beholden to the ingredients that are fresh at the time you perform the task. Data sets, like great veggies or herbs, are often only available in small quantities at certain times of the year. Some professionals thrive in this environment, loving the swirl of possibilities and the frequent changes that must still result in predictable success.

Broad-based pay can often be more like baking than cooking. The data sets are larger and less volatile. Like flour, butter and other less perishable ingredients, you can expect some level of consistency throughout the year. You have a specific recipe that you can follow with only perhaps a replacement of the fruit that goes in the pie or muffin. Many professionals live for this organization, process and exactness.

What we seldom recognize is the precision required to create great art or the creativity required to make a recipe better.

Cooks must practice new things all the time while being flexible with both the ingredients available and their patrons’ tastes. They must learn flavors and techniques to build meals from a wide range of disparate sources. All of this practice must come together at the time of execution so that quick decisions can be made and executed without fear or hesitation. Differentiation is easy and variety allows for many different choices at every meal. Execution is often as much a matter of taste as it is technique. Incentive pay professionals are chefs.

Bakers must work and rework recipes, sometimes for years, to create something that is completely new and confidently repeatable. Differentiation is hard since the ingredients are so similar. Since there are also fewer opportunities for baked goods in any meal, the final product must have wider application and appeal. Execution is about rules and techniques first and taste will generally follow. Board-based pay professionals are bakers.

In reality, most compensation professionals do a little of each of these nearly every day. They are less likely to be as specialized as the pastry chef at a five star restaurant and more like the head chef at the local family café. In other words, you are right. Your job is probably harder than most people realize. When you do it right, most people simply get what they expected all along. When you do it wrong it is obvious to everyone.

In your current position do you identify more as a baker or cook? Which is more enjoyable for you?

03/10/2015

Many companies with employees located in countries throughout the world provide supplemental benefits in addition to those that are government mandated. Usually these supplemental plans are insured: life, disability, retirement, etc.

In highly decentralized companies, the office(s) in each country (sometimes each office in the same country) manages its own process of selecting insurance companies, kinds/levels of coverage and managing a contract(s). If the number of employees is small, the premium will be relatively high because the risk is spread over a small number of people.

Many large companies, however, adopt multinational pooling as a way to finance and have some control over supplemental plans. There are eight multinational poolers in the world covering benefits in 185 countries.

Think of a multinational pooler as a holding company. Under each pooler is a network of insurance companies – usually one insurer per country. A company selects a pooler and purchases insurance plans for each country through the pooler’s network. By pooling all of company employees worldwide together, the financial risk is smaller due to the large number of employees covered. There are several benefits to pooling. It provides:

1) Benefits that are competitive in each country (not the same worldwide)

2) Reduction in the total premiums and administrative costs

3) Annual reporting which makes benefit costs easier to track

When selecting a pooler there are some important considerations. These include: underwriting and termination provisions as well as retention level. I want to focus on one that I believe is extremely important and sometimes neglected in the selection process: due diligence on the pooler’s localmedical insurer in each country.

Of all the different kinds of insurances, medical is the most visible and sensitive as it is the benefit used most often by employees and their families.

Here are two very important things to investigate during due diligence:

* Pre-existing conditions --- Even if the medical coverage is the same as the existing/former plan in each country, the new insurer may refuse to cover pre-existing conditions. This can cause some very unhappy employees.

I know one case where the wife of an employee in the UK had cancer. The new insurer refused to cover her. The damage caused by this one incident required a lot of time and effort to resolve. The multinational pooler finally had to tell the local insurer that they must be waived. That being said, bad feelings remained with the employee, local management and everyone else at that location who knew about it.

* Customer service --- Poor customer service is another issue that can cause problems. Delay of claims processing, denial of claims and slow or no responsiveness to employee questions/complaints create unnecessary tension and frustration.

Fact: Local insurers are more responsive to companies with a large number of employees. Companies with a small number will typically have to take a number and wait. That means someone may need to be appointed as employee/insurer interface to facilitate problem resolution. Local managers having to intercede for employees will see dollar, yen, peso, euro, etc. cost in lost time and productivity. Corporate Benefits can count on hearing about it.

Most local insurers offer excellent service --- the multinational poolers tend to make sure of that. However, if a company is uncertain if problems will be handled properly, a solution might be to engage the services of a local insurance broker that can act as the intermediary. They work with local insurers every day. The fact that they have established, long time relationships with them can be of great help. Knowing the players involved helps in resolving conflict.

Selecting a multinational pooler can be a tedious process, but it's well worth the time to conduct a thorough due diligence — especially on medical insurers. It may not catch all the potential problems, but it’s worth the effort to reduce as many as possible upfront.

Do any of you have experiences you’d like to share?

Jacque Vilet, President of Vilet International, has over 20 years’ experience in Global Human Resources with major multinationals such as Intel. She typically works with companies that are growing overseas either organically or through acquisitions. Her expertise encompasses many areas of HR --- compensation, benefits and wellness, labor law, learning/development, strategic workforce planning and mergers and acquisitions. She has managed both local/ in-country national and expatriate programs and has been an expatriate twice during her career. She has certifications from HCRI, World at Work and Human Capital Institute as well as a B.S. and M.S. in Psychology and an MBA. Jacque has been a speaker in the U.S., Asia and Europe and is a regular contributor to various HR and talent management publications.

02/23/2015

There are disturbing signs that the Human Resource community is losing more of what little relevance it holds today. Even as tradecraft veterans increasingly endorse open transparency in reward systems and recommend robust communications about compensation as the desired best practice, the consensus actual practice is moving away from that ideal.

The most recent study by the global professional society that focuses on Total Rewards is depressing. It indicates that the profession charged with the responsibility of providing effective consequences for worker behavior is not producing results that live up to its ideals. Employers are increasingly failing to explain their salaries to individuals. Confusion about compensation is spreading.

More and more organizations are reporting that only minimal information is shared with employees regarding individual salaries. In 2014, this number reached more than a third (39%).

In addition, the number of organizations admitting that most employees don’t understand their compensation philosophy rose to 46% in 2014. Almost half? Yikes!

Heck, if employees failed to meet their individual objectives as badly as compensation people seem to have fumbled the ball, they would get stern rebukes, critical performance reviews, remedial action plans and downgraded performance appraisal ratings. No bonuses, either!

Most experienced Total Reward professionals agree that transparency is A Good Thing, healthy and positive for all. This conclusion is based on reality rather than just academic theory. Studies and conference workshop presentations routinely reveal that the sunshine of exposure kills the toxic germs of skepticism and suspicion. When information about reward program design and delivery is shared with employees, challenges become less frequent and general morale improves. Whatever is hidden immediately becomes suspect, while what is openly revealed is presumed safe and non-threatening (or management wouldn’t let it be shown).

Yet companies seems to be moving farther and farther away from the approaches considered ideal by HR folk. The desired improvement towards best practice seems to be stifled in favor of a blind adoption of the most common custom. One problem is that what is seen to be the most popular method at any given moment is often not the best option for the future. Another recurring issue is the weakness of HR when it lacks a strong voice “at the big table” where top management makes its critical decisions.

If employers continue moving backwards towards more compensation secrecy, it suggests that either we are wrong about what is "best" or the key decision makers simply disagree and ignore us. Both possibilities are bad. The accelerating trend towards the suppression of transparency shows we are losing the communication battle. The simultaneously growing ignorance of employees about their enterprise’s compensation intentions proves that damage has been done. Potential backlashes are building up. Many HR people may be flailing in frustrated futility even while while isolated islands of excellent achievement find themselves pounded by tidal waves of indifference.

What will it take to change this disturbing status quo situation? Recognition of the issue is necessary before anything can change. Nothing ignored can be corrected. Now you know about it, so you can take action.

In all professions, there are leaders, there are followers and there are the hopelessly lost. Which will you be?

E. James (Jim) Brennan was Senior Associate of ERI Economic Research Institute, the premier publisher of interactive pay and living-cost surveys. After over 40 years in HR corporate and consulting roles throughout the U.S. and Canada, he’s pretty much been there done that (articles, books, speeches, seminars, radio/TV, advisory posts, in-trial expert witness stuff, etc.), serves on the Advisory Board of the Compensation and Benefits Review and will express his opinion on almost anything.

02/03/2015

Where did the anticipated catchup go? “Temporary” pay cuts have become permanent. The salaries of the past may never be restored to those who saw them reduced. The New Normal has been taken for granted so long that no one except labor unions seem to recall that the income sacrifices demanded as temporary expedients have not been rectified or corrected.

A reality check may be in order for those who burble on about how great today’s economy is. Think they were the same ones hopefully claiming a few years ago that the American economic turnaround had already occurred. Perhaps there is value in repeating a mantra, as if wishful thinking will somehow transform dreams into reality. Believe the term for that is “visualization.” Yeah, that’s the ticket! May not be true, but it picks up your spirits.

Some job incumbents have seen their incomes decline steadily over a period of many years. Not just from bonus reductions, but from base cuts, too. The dimensions of the problem might never be known. Remember that those who cut pay are not eager to self-indict by participating in surveys that show their backwards movement in the face of any static pose or upward movement. Studies of actual unimpeachable original sources (like publicly available IRS Form 990 tax returns) proved that rewards were cut very dramatically at tax-exempt enterprises for quite a few annual cycles over the last decade. Cuts started with benefit reductions, then wholesale health care eliminations, bonus cuts, base reductions (masked by churn, of course, with newbies at lower rates displacing prior higher-paid incumbents), elimination of backup/support positions and job redesign (recombining formerly disparate jobs into hybrid positions straddling the totally essential elements of multiple prior positions). The same dynamic certainly took place in the private for-profit sector, to an unknown extent; and it continues today.

Remember that it is difficult to penetrate obscurity. It also is hard to identify what is NOT happening or what is NOT reported due to fear of backlash. Reorganization (virtually unheard of in the public sector) and reengineering can cut headcount and payroll drastically. Those kinds of wholesale shake-ups don’t show up in pay surveys.

Rates of improvement can be deceptive without knowledge of context. Survivors stressed under the pressure of performing mashed-up hybrid functions might get "raises" paying them 115% of their old rate for doing 150% jobs; but the extra strain that save the enterprise $200,000 in eliminated payroll is not fully compensated by a single rare $15,000 raise (or bonus). Much of the most complex reshuffling has taken place behind company-confidential screens. That isn’t visible in published surveys, either.

There were some "shocking" survey results a few years ago showing that something like ~40% of employees had not received a raise "this year" and over 30% or something had not seen any pay increase or had experienced a pay cut over the past 3 years. Those are "missing entries" or absent observations from most surveys. Honest reports of what was paid by those who increased payrolls are misleading because they overlook the reality that some have cut budgets, shed bonuses or reduced fixed wages and salaries.

I could be wrong or simply have a more limited view than others of what had transpired in the private sector. However, you can’t measure what is not openly reported. We know belts were tightened, but when were they loosened? There is little evidence to support contentions that a reversal of the “new normal” is at hand. There are no sweeping trends being announced about skyrocketing increase rates, general adjustments to make people whole or vast expansions of payrolls to restore workers to their prior income levels.

If the explosion of pent-up pay demand predicted for so long has happened, I must have missed it. Who has seen otherwise?

E. James (Jim) Brennan was Senior Associate of ERI Economic Research Institute, the premier publisher of interactive pay and living-cost surveys. After over 40 years in HR corporate and consulting roles throughout the U.S. and Canada, he’s pretty much been there done that (articles, books, speeches, seminars, radio/TV, advisory posts, in-trial expert witness stuff, etc.), serves on the Advisory Board of the Compensation and Benefits Review and will express his opinion on almost anything.

01/21/2015

I don’t know about you but I used to think that expat pay packages were fairly straightforward. Salary, bonus and benefits were governed in accordance with U.S. (or home country) plans.

Allowances were paid competitively based on information from AIRINC or other sources. Pretty cut and dried except for taxation, and I’m not covering that in this post. The only exception was when an expat assignment was extended for a longer than “normal” period of time. If so, they would gradually be integrated onto the host country plans. “Normal” was company specific but commonly defined as three to five years.

Then I happened to read about an American expat in France who became pregnant. Long story short, she discovered that pregnancy leave for local French employees was better than U.S. pregnancy leave. She asked for and received her leave according to French labor law. That was an eye opener. After looking further into this subject, I realized that expat pay and benefits is not as cut and dried as I thought.

The issue I’m referring to is called “choice of law”.

Question: Which country’s labor laws protect an expat?

Answer: It’s the local mandatory labor laws of the host country that apply.* They apply to all employees, even foreigners. The mandatory laws that apply to compensation and benefits include among others: pay rate, overtime, payroll, mandatory benefits, hours, rest periods, vacation/holidays and severance pay.

There are a few exceptions where a home country’s laws apply. These include some supplemental or discretionary plans. However, only a small number of plans are considered discretionary. Examples include executive compensation and equity plans.

No problem you say: “We have our expats sign an agreement that they choose to be governed by U.S. labor laws. Our expats can’t choose to opt out or break the agreement.”

Wrong. Home country choice of law agreements are non-binding and an expat cannot opt out of host country mandatory labor rules.

Some companies are advised to insert these clauses in expat agreements anyway. Why? They may think that the majority of American expats either 1) don’t trust the laws of other countries or 2) believe a U.S. choice-of-law clause is truly legal and expats have no rights under host country law.

But some expats may know that choice of law agreements cannot be enforced. Unfortunately for home country companies, expats posted to rich countries are particularly likely to figure out that host-country law guarantees them more generous benefits --- example, the pregnant expat in France.

Regardless, a company may insert the clause anyway, believing that it will act as an acknowledgment between the expat and the company, even if non-binding, to resolve labor law disagreements. Some expats accept that—even if the law does not force them to.

Question: Is a home-country choice-of-law clause in an expat agreement really a bad Idea?

Answer: Yes --- usually

It can backfire because both sets of laws – host and home --- may end up protecting an expat. S/he gets to "cherry pick" whichever rules offer better protections. The company now has to comply with two sets of labor laws instead of just one. The expat gets the best of both worlds while the company suffers the worst of both worlds.

Therefore lawyers may advise companies to either not include a clause at all or to include a clause that states only the law of the host country will apply.

Moral of the story?

Never overestimate the power of a choice-of-law clause. Assume that the host country laws apply. If you insert a clause in your expat agreements anyway --- be aware that in some situations both home and host country laws may apply. Use of them is tricky. Be sure you get expert legal advice.

*There are different rules that apply in these situations: long business trips, the ”Communist and Arab” exception and extraterritorial reach. There is no space to discuss them here.

Jacque Vilet, President of Vilet International, has over 20 years’ experience in Global Human Resources with major multinationals such as Intel, National Semiconductor and Seagate Technology. She has managed both local/ in-country national and expatriate programs and has been an expatriate twice during her career. Jacque has the following certifications: CCP, GPHR, HCS and SWP as well as a B.S. and M.S in Psychology and an MBA. Jacque has been a speaker in the U.S., Asia and Europe and is a regular contributor to various HR and talent management publications.

01/19/2015

The holiday season is now in the rear-view mirror and everyone reading this post has recently had to answer some version the question, “what exactly do you do?” Maybe you had to explain it for the umpteenth time to a family member who spent the past year sending you articles about payroll. Maybe you had to explain it to someone who blames you, personally, for the disparity in pay between executives and “everyone else.” Perhaps you had to deal with why you had not yet fixed the minimum wage, income taxes, health care or some other headline issue. Or, this might have been the year where the light went on and someone FINALLY realized that you were some sort of workers compensation attorney.

Some of you might have it even worse, your job might include compensation AND benefits. Maybe your title includes the words “total rewards.” Heaven forbid your business card or email signature includes the words analyst, consultant or director. Explaining what you do in a way that everyone can understand can be one of the most difficult parts of the job.

I asked for some help on this post. Some of my esteemed Compensation Café contributors provided two-sentence descriptions of what they do. Some also provided short descriptions of what YOU do.

Here are some of the descriptions of what the contributors do. (Feel free to guess the writer of each in the comment section.)

I help HR leaders leverage the power of thanks and social recognition to empower employees and build cultures of appreciation. Through a more modern and strategic approach to recognition, companies can fuel employee engagement, productivity, and ultimately drive business results.

I assist organizations in solving and resolving their employee pay challenges. From across the street to across the globe, I advise clients as to how best to effectively and efficiently design programs, value positions, measure performance, communicate transparency and ultimately properly spend reward dollars in a manner that benefits both the employer and the employee.

I work with companies on their employee pay/compensation issues. They may need help on problems with salaries, bonuses or a certain benefit. Some of my work is helping companies with employee pay issues in their offices or manufacturing facilities overseas in other countries. Because the laws about compensation are different in other countries, they may need help in making sure their pay plans are legal.

I try to get people to think in new ways about how people and technology impact business outcomes. ​

I diagnose situations and 'splain the range of most applicable HR and compensation policies and practices. Drawing on many decades of experience with virtually every industry and location in North America, I research, summarize, distill and (hopefully) clarify the range of options available for total rewards applications.

Here are some descriptions of what you do…

The primary role of a comp professional is to ensure the right mix of rewards to attract, retain and motivate people to execute its business strategy.

A comp/TR professional collects and analyzes data, conducts diagnoses, makes presentations and implements the most situation-specific suitable range of optional prescriptions for effective solutions in human behavioral issues.

I think the descriptions above simply prove the point of how hard it can be to explain what you do. The thing about the problem is this: If you can't explain what you do, how can you engage your business stakeholders in helping you help them?

Here’s my stab at it.

A compensation professional figures out when, how and how much to pay people given their company’s strategy, budget and culture. In the end the goal is to pay, recognize and support employees (or consultants, etc.) in a way that allows both the employee and company to be successful.

Or, try this:

I figure out how to pay people and adjust as needed.

I should point out that some of my own family still call me to ask if I can provide stock investing advice (I have some deep expertise in equity compensation, but…no.) Friends still ask me to talk to their bosses to explain why they should get a raise (not generally my day job.) And, of course, people regularly blame me for the wealth gap, executive compensation excesses and the rise in housing prices (I wish I had, but do not yet possess, the power to control any of these.) I think you get the point. My holiday season is usually as fun as yours when it comes to this topic.

I would love to have you post your own two sentence descriptions of what you do. Maybe someone else (like me) can use it at this year’s family reunion or holiday party.

01/15/2015

Thinking about a plan redesign any time soon? Experienced designers will advise you, tell you and urge you to start with a really good problem definition. (Did I ever mention how important a good problem definition is?) The problem is, they don't often tell you what a good problem definition involves, what it will offer you and how to get there. So here goes.

Let's look at a poor example. "Our salary structure hasn't been updated in five years. We need to determine whether our pay rates are competitive." Pretty common approach -- candid and concrete -- so why isn't it good enough?

(Some metaphors work, some almost work. See what you think about this one.) That problem statement is akin to saying, "We haven't changed the light bulbs in five years. We need to determine whether we have enough light." Think about that one. Accomodating dim lighting for five years will call for a lot more problem solving for a family than just getting some GEs from Walgreens. What about all of the fallout in the family's relationships, health, housekeeping and so on? These challenges have to be addressed in the solution, too, because they are the reasons you have light bulbs in the first place.

At its heart, a sound problem statement makes it crystal clear why it's important to fix the problem. For instance, pointing out that salaries may not be competitive doesn't explain what that out-of-date salary structure is doing to your business. Executives, who will be funding your efforts with money and FTEs, deserve those insights when you ask them to agree that the project is worth it.

A sound problem statement is not completed in the first project meeting. It involves an analysis of:

Who's being affected? In the salary structure example, probably all employees to some extent, but there are also specifics. Don't you have some real sore spots? For example, other companies beating you to hot talent? Executives and managers losing important contributors? Customers waiting too long for help? Managers dispirited about having to lead without being able to reward? New employees hired into the top third of the range? (See how much more concrete, compelling and strategic the problem statement is becoming?)

What's the breadth and depth of the problem? What will be improved when it's fixed?

When did the problems start? How long will they last? What will happen if you do nothing? What will happen if you run into a financial limitation (not enough money available to make salary adjustments)? Can improvements be made in stages? How far out can you push the expense?

Where? Has it affected all your locations, divisions, jobs, equally? Why is it different in some locations? Are there economic or regulatory issues by location?

Why? Why? Why? Why take the time on this when there are so many other things you could be investing your time in? Most important, what will your business look like if you solve the problem?

The other practical reason for a solid problem definition? As we all know, projects go on and on and on. There's nothing that's better for reorienting a group of people who are losing their bearings than a solid problem definition. Count on it. I know I do.

Our work is an 8 step problem solving process. Learn how to lead when you identify problems and achieve compensation design solutions with our popular eBook, Everything You Do (in Compensation) Is Communication. Margaret O'Hanlon, CCP collaborated with Ann Bares and Dan Walter to bring the book into the world. You can download it at www.everythingiscommunication.com. Margaret is founder and Principal of re:Think Consulting. She brings deep expertise in compensation, career development and communications to the dialog at the Café. Before founding re:Think Consulting, Margaret was a Principal with Towers Watson.

01/14/2015

Most salary marketplace surveys don’t agree on much of anything. Except on the most general terms, pay surveys usually show results that vary from each other.

There are many good reasons for survey differences.

There would be no market for redundant surveys that all said the same thing. Why pay twice for the same information?

Without variable results, buyers could not pick and choose among the information sources they prefer to rely on or to ignore.

Business models also make a big difference to the results published in the professional pay survey trade. That is probably the most significant reason for surveys to vary, because collecting/analyzing really good data very well/carefully, consistently, continually, etc., is an extremely expensive process. You must assure there is a large market willing to pay for it, to cover your costs and offer a bit of profit.

Commercial surveys with a long established history of high reliability and assured acceptance in board rooms, government agencies and courts may cost the most because they remain the best. On the other hand, if you produce free or el cheapo calculators for job-seekers, especially if you want to encourage them to use your employment agency (or one of your advertisers), you tilt the numbers or selectively cherry-pick your sources to produce exaggerated anticipated pay figures that will please applicants. If you target employers, you similarly craft your survey product to their needs. Some have been rumored to flaunt wildly high salaries to employees who complain to their management who then buy different surveys showing lower numbers from the same vendor. Sneaky but effective, if you are a marketing type rather than an HR/comp professional and are able to appear on the doorstep right after a disgruntled employee has presented an outlandish pay rate from one of your “less accurate” free or cheap products.

Each separate survey usually asks different questions (or reports them in different ways) and uses different benchmark titles for different markets and industries. Making their results unique supports the other reasons above.

Most compensation surveys vary in rather consistent ways. Those from BigConsultingGiants run a bit high (concentrating on data from their massive and profitable clients, one may presume). Government surveys run low (lacking size/profit sensitivity, concentrating on well-established conservative employers, etc.). Various dot-com calculators produce REALLY high numbers while others are a bit low, depending on their sourcing and business models. Some medium price-range surveys are usually right on the norm or a slight bit above. Basically, pay surveys generally reflect to their demographic source characteristics; i.e., surveys of corporations tend to yield higher pay rates than surveys covering mom & pops, charities, small public agencies, etc., which offer non-cash reward advantages ranging from ownership, intrinsics, security, benefits and such. One of the problems with identifying the real true “norm” of all organizations is that no aggressive employer wants to be just the average enterprise.

A few companies offer data aggregation, which can be problematic due to obvious provenance credibility issues and especially hidden redundancy. If you participate in both the X survey and the Y survey and get their results either free or at a discount, while vendor A combines the copyrighted summaries from X and Y, the "composite survey" by supplier A gives you nothing new or different from what you could yourself derive from the X and Y surveys you already have. In fact, it misleads you into thinking you have a third independent source while you don't, really: you just have the same data repeated again. It also may be impossible to learn how the X and Y data has been weighted in the amalgamation if not simply averaged. Aggregation lets the vendor sell a truthy-looking knockoff product with minimal research and analysis costs, while legitimate surveyors (not marketing firms advertising themselves as pay data suppliers) disappear.

Long story short, the more independent transparent surveys there are, the better we all are. The shrinkage of the pool of comprehensive reliable pay surveys who actually send out (or display) their data-gathering questionaires and openly publish their methodologies and reliability statistics should be a matter of professional concern.

What other observations about compensation surveys should be made?

E. James (Jim) Brennan was Senior Associate of ERI Economic Research Institute, the premier publisher of interactive pay and living-cost surveys. After over 40 years in HR corporate and consulting roles throughout the U.S. and Canada, he’s pretty much been there done that (articles, books, speeches, seminars, radio/TV, advisory posts, in-trial expert witness stuff, etc.), serves on the Advisory Board of the Compensation and Benefits Review and will express his opinion on almost anything.

01/12/2015

According to Deloitte, more than 50% of U.S. companies think there will be a global pandemic in the next few years. Two-thirds think it will seriously disrupt their operations. In spite of that, 67% say they aren't prepared.

Companies are looking at this issue like a deer in the headlights. They don't know what to do. It’s like they’re hoping it will just go away.

It’s easy to understand why companies procrastinate in drawing up a preparedness plan. It’s tough to do when all you have are a bunch of questions and no answers. Plus it’s never happened before. Well, it almost happened with Ebola --- still might --- but we stumbled our way through it didn’t we?

Trying to address everything is too much, so let’s just focus on compensation and benefits issues.

There are laws that are supposed to help us but each is very narrow in scope and taken together they’re often contradictory. Namely OSHA, ADA, FLSA, EEOC, Workers Compensation and various state laws.

For example, if a company learns that an employee has been infected, it has a general duty to protect its employees under OSHA. It also has a responsibility under most state Workers Compensation laws. However, if a company reveals the identity of an infected employee, it could expose itself to claims under the ADA and violations of state privacy laws.

A company’s challenge of integrating the laws involved during a pandemic is even more difficult outside the U.S. Local laws, including labor, employment and health laws, could impact the plan’s legality on a local basis.

For example, strict European data privacy laws present challenges when local offices try to share medical information with the parent company outside Europe. In some countries like China, companies are required to pay for extended sick leave. In contrast, Mexican law can sometimes require a company to suspend an infected employee without pay until s/he is well.

With all the complexity involved it’s important for a company to have its pandemic preparedness plan reviewed for compliance with all relevant laws.

Here are some compensation and benefits questions that need addressing:

1) If employees become sick and have used all their paid sick and vacation leave will they be able to “borrow” paid leave days from the next year?

2) According to the DOL companies have to pay exempt employees for a full week even if they work a partial week. From a cost perspective will your company limit the number of sick exempts allowed to work from home knowing they will not be able to work a full week?

3) What can be covered under the Family Medical Leave Act under pandemic circumstances?

4) Will a company pay for the entire or a portion of the cost for preventive medical treatment? Regardless of who pays what amount, will treatment be mandatory in order to continue working onsite?

5) Will employees who have infected family members be allowed to come to work onsite?

6) Will health insurance continue to be paid for an employee who has an extended absence or dies? Even if a company wants to continue coverage for the family, insurance providers may not allow it.

7) Will employees be paid during extended absence and at what rate? Will this be the same regardless of whether the employee’s sickness causes the extended absence as when some state/federal authority mandates no employees (sick or not) at the workplace for an extended period of time?

8) How will expatriates’ healthcare needs be handled? Will there need to be a medical evacuation plan for them?

9) How will collective bargaining agreements complicate addressing all of the above?

These are just some of the questions that a company will need to answer as part of developing their preparedness plan. Legal requirements are the easiest to address. Aside from that, a company also has to consider cost and company culture/employee morale.

As well-rounded Compensation pros, we need to consider and address all these different perspectives.

What do you think?

Jacque Vilet, President of Vilet International, has over 20 years’ experience in Global Human Resources with major multinationals such as Intel, National Semiconductor and Seagate Technology. She has managed both local/ in-country national and expatriate programs and has been an expatriate twice during her career. Jacque has the following certifications: CCP, GPHR, HCS and SWP as well as a B.S. and M.S in Psychology and an MBA. Jacque has been a speaker in the U.S., Asia and Europe and is a regular contributor to various HR and talent management publications.

12/29/2014

All decisions are B.A.D. decisions, relying on the Best Available Data known at the time.

Even compensation experts, supposedly the most analytical of HR types, have difficulties with data. Makes sense to me, because all human decisions are B.A.D. decisions, made according to the “best available data” when action was required.

When there is no good data, you must rely on the Best Available Data. The resulting acronym (B.A.D.) is quite meaningful as well as memorable. The process of making decisions without access to complete and perfect information occurs every day. The best professional survey analyses involving “counts”, for example, report their reliability statistics. And guess what they define? The estimated rate of error contained in their statistical results. Standard erroris a vital measure because it predicts how much of a miss is likely when relying on the normative results derived from a particular observation sample. It is much like the spread in the shot pattern you get from pellets dispersed by a shotgun; or from sand thrown by hand, where wet sand will be more densely clustered than loose sand.

Every measurement, even the best, comes with a certain risk of error. Tight standards of precision offer more hope of being “right” and strenghten the ability to make inferences from studies, but that is not always possible or useful. The real world is filled with bad information, inadequate facts and missing data points. And the opposite situation occurs, too, where you are flooded with contradictory information. In this Internet world, it seems like anyone can find support for almost any contention somewhere. Too Much Information (TMI) has become a catchphrase acronym.

Relevance counts, as well. Despite access to all the information in the world, you can never be sure that one particular answer will prove to be valid in your particular unique situation.

Sooner or later, you may reach a point where you can only speculate before acting without perfect confidence. Even in the numbers-oriented world of compensation management, Scientific Wild-Ass Guesses (SWAGs) still are required sometimes. Operating in circumstances where useful facts may be missing is a normal part of the total rewards profession. The more often you enter uncharted waters, the more frequently you will find an absence of robust benchmark studies with relevant useful facts that can guide your choices, suggest options or demonstrate context. Then, it is time to get B.A.D.!

The best approach when dealing with ambiguity generally is to define your assumptions, explain the risk level and give it your best shot. For instance, if no one complains over an admittedly arbitrary guess about what you think a specific job should be paid, you are probably offering to pay too high and they don't want you to find out because it makes life easier for them. When hiring managers grumble but are able to comply easily and operate adequately, then the approximation is probably just about right.

If any SWAG based on the Best Available Data works out, then your B.A.D. decision will be the best possible outcome.

E. James (Jim) Brennan was Senior Associate of ERI Economic Research Institute, the premier publisher of interactive pay and living-cost surveys. After over 40 years in HR corporate and consulting roles throughout the U.S. and Canada, he’s pretty much been there done that (articles, books, speeches, seminars, radio/TV, advisory posts, in-trial expert witness stuff, etc.), serves on the Advisory Board of the Compensation and Benefits Review and will express his opinion on almost anything.